At CoPower, we’re helping everyone participate in the transition to a clean energy economy. It’s not news that clean energy is a major driver of job and wealth creation in the US today with hundreds of thousands of jobs depending on continued growth in clean energy installations. Unsurprisingly, since the results of the US election, many of our friends and clients have been reaching out to ask what the implications for clean energy might be.
We’d like to drill down on a more microeconomic perspective. Namely, will the US clean energy economy be able to survive in the short term – particularly for the next two years, while Republicans control the Presidency, both houses of Congress, and potentially also the Supreme Court?
The question boils down to: How exactly can the next administration affect the market for clean energy and energy efficiency, on both the demand side and the supply side?
Does the US clean energy industry have enough momentum to expand and thrive despite the coming changes to federal policy?
On the demand side: Most energy policy is made at the state level: renewable portfolio standards, most tax credits for installing energy efficient equipment or purchasing electric vehicles, and the like. These policies are reasonably secure; unsurprisingly, the states with the strongest clean energy and energy efficiency regimes—California, New York, Connecticut, Minnesota—were and remained Democratic.
Some energy policy is federal. This breaks down into a few categories:
- The renewable fuels standard for ethanol & advanced biofuels;
- EPA-led initiatives such as fleet emissions standards;
- The investment and production tax credits (ITC & PTC), and accelerated depreciation programs for energy equipment.
Many of these incentives were brought in as part of the stimulus act, and were already being phased out by President Obama. It is true that investment in clean energy innovation, promoted by programs like the SunShot initiative, will likely be reduced, potentially hurting the US’s global competitiveness in the clean energy economy in the longer-term. Overall, though, we don't expect most clean energy incentives in the US to change enough to harm the economy in the short term.
On the supply side: Imposing higher import tariffs on solar panels and equipment may have a short term effect. Most solar panels are built in China, for example, and President-elect Trump has singled them out for scrutiny under his administration.
However, not only are the costs of this equipment already at an all-time low, GreentechMedia predicts a further decline in solar module prices of 50% by the end of 2017. LED lighting and energy storage are also following comparable cost curves. Even if the next administration does impose tough import policies on externally-sourced equipment, these cost declines will more than compensate for any punitive tariffs, increasing the attractiveness of solar in comparison to fossil fuel based forms of energy. Regardless of ideology, those making business decisions will see this.
Furthermore, although some building materials such as solar panels are externally sourced, most of the economic benefits of clean energy and energy efficiency are enjoyed locally. Maintenance and installation are performed by local firms, and much of the higher-value equipment, including Tesla’s cars and its lithium-ion batteries, is manufactured in the US, supporting domestic industries and jobs.
In conclusion: We expect that during the next administration, we’ll continue to see the clean energy economy flourish and expand throughout the US and globally. While we’re not likely to see President Trump be as supportive of clean energy as President Obama was, he’s likely to at worst build a speed bump rather than a wall.